In the Philippines, education is a treasured opportunity that most Filipinos aspire to have for better and brighter futures. Unfortunately, due to the global health crisis of the COVID-19 pandemic and the work-from-home trend following it, the enrollment rate dropped by 27.3% in 2020 alone.
As a developing and recovering country, the enrollment rate in the Philippines is volatile and greatly influenced by demographic trends. The Filipinos’ education during the pandemic is substantially affected primarily because of inadequate resources. Filipino breadwinners are inclined to provide household needs such as food and shelter, evidently heeding to essentials rather than privileges.
What are student loans?
Student loans address these social and financial issues, with loan providers funding a student’s education under the condition that borrowers repay them later. Applying for a student loan has advantages. Compared to other forms of debt, such as credit cards and unsecured loans, student loan debt is considered “good debt” since education builds human capital.
Student loans can lead to a better career opportunity and potentially earn a higher income. Thus, creditors look at it differently, making student loan debt more difficult to get discharged into bankruptcy.
Student loans that are subsidized do not accrue interest while a borrower is enrolled at least half the time. Interest on unsubsidized student loans starts to compound as soon as the loan is disbursed or released to the borrower.
Advice from Experts on How to Manage Student Loans
1. Know all facts
It is essential to know what you are getting into before taking out a student loan. You must do as much research as possible and entertain all the questions that come to your mind. It is easy to go through the process to ensure you have the money to pay for your education. However, inculcating your role as an informed consumer is crucial because these loans will affect your future.
Get involved every step of the way. Student loans are probably the first debt you will incur in your life. Therefore, you need to know the seriousness of taking on debt. Indeed, most student loans do not need to be repaid until after the borrower leaves school.
Still, if the borrower is not paying attention to the amount they are borrowing every year, they may be in for a complete shock once they graduate and see the total price tag.
2. What to consider when choosing a loan provider
Before deciding on a loan provider, you should ensure that you understand the following about your student loans:
- Detailed information of your loan servicer
- How much money you’ve borrowed or are planning to borrow
- Your fixed or variable interest rate and origination fee, and how it will influence your expenses of borrowing
- The issue date on your loan, and if you are required to pay an upfront fee
- Your first payment date and whether the loan has a grace period
- The period of your loan
- Your repayment strategy and if discounts are given to early payments
Once you get a hold of the information, use a student loan calculator to compute your monthly payments and estimate how much interest you’ll be charged. A student loan calculator will give you a clearer sense of how much you owe on a month-by-month basis.
3. Don’t ignore your financial problems
The most evident yet overlooked piece of student loan debt advice is to not default on your student loans if you can avoid them. Instead, contact your loan servicer right away if you’re struggling to make payments and having difficulty earning some extra income.
You might be able to avoid payments temporarily, so your loans don’t become delinquent or go into default. However, defaulting on the debt will likely worsen a bad situation, as it can destroy your lead to wage garnishment and credit score.
Upon graduating and getting a job, spending money is tempting. However, in avoiding these loan defaults, experts advise you to continue living like a student and allocate the extra cash to your debt. Focus on paying off your loan rather than the overwhelming amount you must pay back. No matter how small you pay, they will eventually sum up to a significant value if done incrementally.
In line with this, a tried-and-tested strategy for loan repayment is the debt avalanche and debt snowball method. Under the debt avalanche technique, you should prioritize paying off debts with the highest interest rate. Meanwhile, in the debt snowball method, you focus first on directing loan repayments with the smallest balance.
The sooner one of your debts is taken off the list, the more you will feel encouraged to pay off everything.
Finance your Future
Having sufficient savings is ideal to fund your education, but the financial capabilities are limited for some. Student loans can address these constraints, supporting your education on the condition that you will pay it back later. There are plenty of advantages in applying for a student loan; the most evident, of course, is reaping the benefits in the long term and knowing how to survive the real world.
In getting a student loan, it is crucial to listen to the experts and know all the facts. When choosing a loan provider and terms, you must have all information and select the one you’re most compatible with. Reevaluating your student loan every year can help you strategize your repayment scheme and significantly affect your finances.
Finally, don’t ignore your money problems; instead, contact your loan service right away to prevent defaulting on debt.